Revista de
Administração
Contemporânea
Journal of Contemporary Administration
Methodological Article
Board of Directors’ Interlocks: A Social Network
Analysis Tutorial
Conselhos de Administração Interligados: Um Tutorial de Análise de Redes
Sociais
ABSTRACT
Objective: the literature on board interlocks has increased in recent years,
focusing on understanding board composition and its relationships with
other companies’ boards. Such studies usually require multiple procedures
of data extraction, handling, and analysis to create and analyze social
networks. However, these procedures are not standardized, and there is
a lack of methodological instructions available to make this process easier
for researchers. This tutorial intends to describe the logical steps taken to
collect data, treat them, and map and measure the network properties to
provide researchers with the sources to replicate it in their own research.
We contribute to the literature in the management field by proposing an
empirical methodological approach to conduct board interlocks’ research.
Proposal: our tutorial describes and provides examples of data collection,
directors’ data treatment, and the use of these data to map and measure
network structural properties using an open-source tool — R statistical
software. Conclusions: our main contribution is a tutorial detailing the
steps required to map and analyze board interlocks, making this process
easier, standardized, and more accessible for all researchers who wish to
develop social network analysis studies.
Keywords: board interlocks; social network analysis; tutorial.
* Corresponding Author.
1. Heriot-Watt University, Edinburgh Business School, Edinburgh, United Kingdom.
2. Universidade do Vale do Rio dos Sinos, Programa de Pós-graduação em Engenharia de Produção e
Sistemas, Porto Alegre, RS, Brazil.
3. Universidade do Vale do Rio dos Sinos, Programa de Pós-graduação em Administração, Porto Alegre,
RS, Brazil.
4. Universidade do Vale do Rio dos Sinos, Programa de Pós-graduação em Ciências Contábeis, Porto
Alegre, RS, Brazil.
Cite as: Salgado, C. P., Adami, V. S., Verschoore Filho, J. R. S., & Costa, C. M. (2022). Board of directors’
interlocks: A social network analysis tutorial. Revista de Administração Contemporânea. Advance online publication.
https://doi.org/10.1590/1982-7849rac2022210286.en
Published as Early Access: April 14, 2022.
# of invited reviewers until the decision:
1 2 3 4
1st round
Revista de Administração Contemporânea, 2022, Early access | doi.org/10.1590/1982-7849rac2022210286.en| e-ISSN 1982-7849 | rac.anpad.org.br
e-ISSN: 1982-7849
Claudine Pereira Salgado1
Vivian Sebben Adami2
Jorge R. de Souza Verschoore Filho3
Cristiano Machado Costa*4
RESUMO
Objetivo: pesquisas sobre board interlocks vêm crescendo nos últimos anos,
com foco no entendimento da composição dos conselhos assim como suas
relações com conselhos de outras companhias. Esses estudos normalmente
requerem múltiplos procedimentos de extração, tratamento e análise de dados
para a criação e análise das redes sociais. Entretanto, esses procedimentos não
são padronizados, havendo uma falta de estudos metodológicos com instruções
para tornar este processo mais simples. Assim, este tutorial pretende descrever
a sequência lógica de passos a serem percorridos para realização da coleta de
dados, tratamento, mapeamento e análise das redes sociais, para prover aos
pesquisadores os insumos necessários para replicação desses procedimentos
em suas pesquisas. Nesse sentido, este tutorial contribui com a literatura
no campo de pesquisa da administração por propor uma metodologia para
condução de pesquisas em board interlocks. Proposta: o tutorial descreve e
exemplifica a extração e tratamento dos dados das empresas e seus conselheiros,
o uso destes dados no mapeamento das redes de board interlock e a medição
de suas propriedades estruturais, utilizando uma ferramenta open source, o
software estatístico R. Conclusões: nossa principal contribuição é fornecer
um tutorial que orienta o processo de mapeamento e análise dos board
interlocks, tornando-o mais acessível aos pesquisadores que desejam adotar esta
abordagem de pesquisa.
Palavras-chave: board interlocks; análise de redes sociais; tutorial.
JEL Code: G3, G34, G38, L14.
Editor-in-chief: Marcelo de Souza Bispo (Universidade Federal da Paraíba, PPGA, Brazil)
Reviewers: Francisco José Costa (Universidade Federal da Paraíba, Brazil)
Jeferson Lana (Universidade do Vale do Itajaí, Brazil)
Henrique Castro Martins (Fundação Getulio Vargas, EAESP, Brazil)
Peer Review Report: The Peer Review Report will be available once the article is assigned to an issue.
Received: October 29, 2021
Last version received: March 18, 2022
Accepted: March 24, 2022
5 6 7 8 9
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Board of directors’ interlocks: A social network analysis tutorial
INTRODUCTION
Within the increasing of corporate governance
studies, board interlocks have become one of the most
prominent research topics (Lamb & Roundy, 2016). The
available literature defines a board as being interlocked
when a director sitting on the board of directors of
Company ‘A’ also sits on Company ‘B’ (Smith & Sarabi,
2021a). Interlocks can be explored from the companies’
perspective or from the directors’ perspective. When
analyzed from companies’ perspectives, the literature
calls it ‘board interlocks,’ and focuses on evaluating the
relationship formed between companies that share at least
one director. Conversely, the literature names ‘interlocking
directorates’ when we are looking for interlocks from
directors’ perspective, to understand the relationships
and the links formed between directors (Fich & White,
2005). To explore interlocks, in this paper we use the first
perspective, shedding light to the companies and their
relationships through board interlocks.
Interlocked boards have become a focus of
increasing attention in several countries around the
world, including Singapore (Phan, Lee, & Lau, 2003),
France (Yeo, Pochet, & Alcouffe, 2003), United States
(Fich & White, 2005; Wong, Gygax, & Wang, 2015),
Italy (Drago, Millo, Ricciuti, & Santella, 2015), India
(Helmers, Patnam, & Rau, 2017), and Saudi Arabia
(Hamdan, 2018). Lamb and Roundy (2016) conducted
a systematic review of board interlocks studies and
presented many applications relating board interlocks to a
range of corporate aspects, such as its impacts on company
performance (Davis & Cobb, 2010; Hillman, Withers, &
Collins, 2009; Pfeffer, 1983), or how companies manage
environmental uncertainty (Useem, 1986). They also
present studies regarding board interlocks serving as a sign
of a firm’s quality (Certo, 2003; Higgins & Gulati, 2003;
Kang, 2008), or even how interlocks can facilitate access
to unique and distinct information from interlocked
companies (Haunschild & Beckman, 1998).
Since 2009, the CVM Ordinance 480 (Comissão
de Valores Mobiliários, 2009) has established that
Brazilian public companies must disclose their corporate
governance (board composition, committees, executive
compensation, governance practices, and so on) and
financial data (financial statements) to the regulator
(CVM — Comissão de Valores Mobiliários) once a year
through the Reference Form (Formulário de Referência).
An extensive part of the information required is filled
by the companies manually and there is no validation of
the data provided, while some companies have initially
refused to comply with executive compensation disclosure
by using a court injunction (Costa, Galdi, Motoki, &
Revista de Administração Contemporânea, 2022, Early access | doi.org/10.1590/1982-7849rac2022210286.en| e-ISSN 1982-7849 | rac.anpad.org.br
C. P. Salgado, V. S. Adami, J. R. de S. Verschoore Filho, C. M. Costa
Sanchez, 2016). These features may contribute to a lack
of pattern as well as missing information in the data used
by researchers, requiring further procedures and reliability
analysis.
Besides that, the number of studies using data
from Reference Form has increased in recent years.
Sprenger, Kronbauer, and Costa (2017) conducted
data collection from Reference Form in 2017, focusing
in understand CEO features and its effects on earnings
management. The authors have collected CEO features
such as name, age, experience, education, duality, and
type of election manually. The data collection has become
easier since the issuing of R packages to do so, such as
GetFREData package (Perlin, Kirch, & Vancin, 2018).
Locatelli, Ramos, and Costa (2021) used this package to
collect Brazilian companies’ data from Reference Form
from 2012 to 2018 to evaluate the effects of social ties
on CEO turnover. Likewise, Mastella, Vancin, Perlin,
and Kirch (2021) also collected data from Reference
Form to investigate the effects of board gender diversity
on performance and risk taking in Brazilian companies.
Beuren, Pamplona, and Leite (2020) also used the same
dataset to investigate the relationship between executive
compensation and the performance of family and non-
family Brazilian companies, while Rodrigues and Galdi
(2017) used the data from Reference Form to evaluate
investor relations and information asymmetry in Brazilian
companies. All these studies relied on further analysis
and manual procedures of data handling and processing
to identify incorrect information and correct it before
creating variables and econometric models. There is
no requirement of board interlocks’ disclosure on the
Reference Form. In this sense, it is not possible to find
explicitly the interlocks formed between companies that
share at least one director. That is one of the reasons why
when conducting board interlocks studies, the researcher
must collect data from the Reference Form, analyze its
reliability and then run the procedures to identify the
connections between companies through board interlocks.
Smith and Sarabi (2021b) pointed out topics not yet
explored in board interlocks studies, such as: (a) how
board diversity develops within the interlocking network
and affects performances; (b) interlocks and corporate
governance structures in emerging economies; and (c)
new theoretical approaches, aiming to compare different
institutional settings and countries. The first two topics
are empirical avenues of research still unexplored and
that can be studied in the Brazilian context using the data
available and the methods of social network analysis (SNA)
presented in this article. Other unexplored possibilities of
use of SNA to study Brazilian corporate governance data
include analyzing Fiscal Council members’ networks, and
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Board of directors’ interlocks: A social network analysis tutorial
networks of board members appointed by state-owned
enterprises and/or institutional investors.
A social network is a collection of individuals or
companies interconnected by many different sorts of
links (Lazzarini, 2008). SNA can be used to analyze the
consequences or causes of board interlocks existence. One
of the challenges faced by researchers is to obtain access to a
detailed dataset related to board members and companies.
Usually, these datasets are not easily manageable. In some
countries, such as Brazil, the data for public companies
is non-structured, so researchers must follow many steps
in the performance of their research, which require a lot
of hand-collected data. Another drawback in this field
of research is that the procedures to create and analyze
networks’ measures are usually not well detailed in the
previous studies. This can be a result of word limitations
or standards from different fields of study and journals.
Therefore, it is hard to find some standard or guidance
when conducting social network analysis research. In this
tutorial, we aim to explain with details, step by step, the
procedures involved in the conducting of data collection,
data treatment, and how to map and measure the network
properties of board interlocks. This study contributes
to the literature in several ways: (a) by establishing a
methodological way to conduct procedures and handle
social network analysis; (b) by providing researchers
with practical instructions to properly conduct these
procedures, spending less time in manual tasks, increasing
data reliability; and (c) providing a standard to conduct
such tasks. This study can also encourage more masters
and PhD students to explore the SNA and board interlocks
fields of study, not yet widely explored in Brazil.
Furthermore, this tutorial can be of interest of
researchers analyzing the “G” of the recent ESG topics,
including the causes and consequences of the relationships
between different actors (e.g., companies and directors).
Within the corporate governance context, the method
proposed in this tutorial makes it possible to analyze the
composition of the networks, encompassing relevant issues
such as diversity and connectivity of boards. For example,
we may investigate if while pushing the gender diversity
agenda companies become more connected as the presence
of women increases, or alternatively may be resulting in the
‘super-connected director’ phenomena (Crabtree, 2011).
In addition, our tutorial may allow researchers to evaluate
how connections between companies from different sectors
affect different aspects of corporate governance, including
ESG requirements and policies (Harjoto & Wang, 2020).
Additionally, we briefly discuss SNA concepts
and the ideas presented in the most high-impact studies
available in this field, shedding light to possibilities of
studies using SNA. Even though in this study we explore
Revista de Administração Contemporânea, 2022, Early access | doi.org/10.1590/1982-7849rac2022210286.en| e-ISSN 1982-7849 | rac.anpad.org.br
C. P. Salgado, V. S. Adami, J. R. de S. Verschoore Filho, C. M. Costa
board interlocks, SNA can be used as a framework to
understand relationships and behaviors across many other
research subjects. For instance, in management it can be
used to evaluate the relationship between countries through
trading patterns (Smith & Sarabi, 2021a), and in medical
studies, by evaluating the social interactions across animal
species (Rocha, Ryckebusch, Schoors, & Smith, 2021).
To illustrate the process focused on this paper, we used a
database of Brazilian listed companies in 2019 and 2020 to
set out the networks and measure their properties, using R
Studio to apply the steps described. The sample resulted in
592 companies listed in 2019 and 629 companies in 2020.
This article is organized as follows: we first present
the literature concerning board interlock and SNA; the
following section describes how to measure interlocks
in our dataset, following the steps of data collection and
treatment, forming a relational matrix, and then visualizing
and measuring board interlocks using R; finally, we explore
some of the advantages and limitations of the method and
present our concluding remarks.
BOARD INTERLOCKS LITERATURE
Board interlock is the relationship between two
company boards when they share at least one director.
In other words, board interlock occurs when a director
of company ‘A’ also belongs to the board of directors of
company ‘B’ (Fich & White, 2005). Besides this, a board
interlocking network is a group of company boards and
all the interlocks among them (Wong et al., 2015). Board
interlock can include studies in different fields, such as
finance, governance, and sociology.
Interlocks can be seen as a communication tool
between different companies. Lamb and Roundy (2016)
showed that interlock research could adopt two perspectives:
the company’s perspective and the director’s perspective.
Interlocks can occur from a company standpoint to create
links between companies, reach financial objectives,
reduce environmental uncertainty, or improve the
board monitoring ability. In addition, companies can be
interlocked as a signal to current and potential investors.
For example, when a company appoints a director from
a corporation with a high reputation, this can signal its
quality. From the director’s perspective, they found that
the directors want to be interlocked to advance their careers
and extend their connections by making social links.
Board interlock studies have been increasing over
time. Many try to find evidence of board interlocking
consequences, such as the effects of board interlocking
on strategic decision-making, such as the design of
CEO compensation package (Fich & White, 2003;
Larcker, Richardson, Seary, & Tuna, 2005), earnings
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Board of directors’ interlocks: A social network analysis tutorial
management (Tham, Sultana, Singh, & Taplin,
2019), company performance (Vesco & Beuren,
2016), and the strength of corporate governance
(Silva, Silva, Vasconcelos, & Crisóstomo, 2019). Bebchuk
and Fried (2004) also showed that the monitoring
function could fail when a director serves several
boards. They would be more likely to agree with CEOs’
opportunistic behavior or other situations in which
the shareholder’s profit maximization could be injured.
On the other hand, Mazzola, Perrone, and Kamuriwo
(2016) argued that interlocked companies are more likely
to achieve new product development outcomes due to
providing experience sharing and information to mitigate
drawbacks. By this view, board interlock could accelerate
the development process of new products.
Each country has its laws designed to regulate board
interlocks. In Brazil, Federal Law 6,404/76 has established
that a director who sits on a company’s board may not be
elected to sit on a concurrent company board (Lei n. 6.404,
1976). However, such an arrangement is not prohibited.
The ruling is often different in other countries such as the
U.S., where the Clayton Act (1914) restricts directors from
sitting on two boards of competitor companies. Besides
this, public companies in Brazil do not have to directly
disclose the interlocks between their directors. Hence, in
such a case, to identify interlocks between companies, it
is necessary to obtain the board composition from the
Reference Form, which consists of a set of information that
public companies need to deliver to CVM annually. There
is a range of information available in this document, such
as board composition, board and CEO features, as well as
several financial and economic data. As we will explain in
the following sections, we then need to perform procedures
on the database extracted to identify interlocks. This kind
of database makes it possible to map the network formed
between public companies and directors and analyze the
existent patterns of relationships. An effective way of doing
this is using social network analysis tools.
SOCIAL NETWORK ANALYSIS (SNA)
The network analysis in the structural approach
first verifies the existence of connections between two or
more nodes and is interested in how these connections
affect their behavior (Kilduff & Tsai, 2003). The nodes
represent the actors, and lines represent the relationship
between them. Nodes are the entities that make up a
system, and these can be individual agents, like each
person, or groups of individuals like teams; they can also
be events, companies, or countries (Everett & Borgatti,
2013). The lines, meanwhile, represent social relationships
that connect the nodes of that system. Thus, the system
is an intuitive representation of the structure of existing
Revista de Administração Contemporânea, 2022, Early access | doi.org/10.1590/1982-7849rac2022210286.en| e-ISSN 1982-7849 | rac.anpad.org.br
C. P. Salgado, V. S. Adami, J. R. de S. Verschoore Filho, C. M. Costa
relationships for a given network, which, in SNA language,
is a network graph or sociogram (Scott, 1992).
Cohesion and density
The most relevant structural properties in the SNA
for a network are characterized as cohesion, involving
such elements as density, centralization, and centrality
(Borgatti, Everett, & Johnson, 2018; Scott, 1992). Density
is a property at the network level indicating how compact
or cohesive the network is. It is obtained by measuring
the general level of connections between all the participant
nodes and is used for comparing different networks (Kilduff
& Tsai, 2003). In quantitative terms, it corresponds to the
number of connections and is expressed as a proportion
over the number of possible links (Borgatti et al., 2018).
It can vary from zero to one, reaching the value ‘1’ when
there are connections between all the participating nodes
(Wasserman & Faust, 1994). For example, Croci and Grassi
(2014) measured the network density of the companies
listed on the Italian Stock Exchange, obtaining the value of
0.0268 for the main component. In that paper, this value
is associated to a tendency of companies to be strategically
connected.
However, density does not state how the links are
distributed across the network. Other cohesion measures
that help in this respect are the number of components, their
size, and the degree of connectedness or fragmentation.
The larger the main component (component with the
higher number of nodes in the network), the greater the
number of nodes that are part of this component and the
greater the global cohesion of the network (Borgatti et al.,
2018). Connectedness is the proportion between pairs of
nodes that can reach each other by a certain path, while
fragmentation measures precisely the opposite, that is, the
ratio between pairs of unreachable nodes (Borgatti et al.,
2018). The connectedness is calculated using Equation
1, and the fragmentation is one minus connectedness
(Borgatti et al., 2018).
(1) (1)
in which i and j are nodes, r equals 1 if the nodes i and j
are in the same component, and zero otherwise. Dahlin
and Patel (2022), for example, studied board interlocks
in different counties of Sweden and found a high level
of fragmentation in all of them. The networks had
approximately 6,000 components and 11,000 companies,
with many isolated. In the paper’s context, these structural
characteristics were associated with difficulties in the
spread of information.
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Board of directors’ interlocks: A social network analysis tutorial
Centrality measures
The centrality property allows identification of the
importance or ‘degree of popularity’ of a particular node
(Scott, 1992), therefore, a property at the node’s level. From
the perspective of the position of the nodes in the networks,
we can observe three essential types of centralities: degree
centrality, closeness centrality, and betweenness centrality.
These metrics reflect the importance of individual nodes
in a network under different aspects (Wasserman & Faust,
1994).
Degree centrality is that central node with the
most links with other nodes in the network (Lazzarini,
2008). According to Zhu, Watts, and Chen (2010), degree
centrality measures the number of links with other nodes
in the network. In business power studies, for example, the
literature points out that those nodes with a high degree
of centrality generally exercise dominance over more
peripheral nodes (Kilduff & Tsai, 2003). By the adjacency
matrix X of a network, degree centrality is a simple sum
of rows or columns of the adjacency matrix. If di is the
degree centrality of node i and xij is the (i, j) record of the
adjacency matrix, it must be calculated as in Equation 2
(Borgatti, Mehra, Brass, & Labianca, 2009).
(2)
In the example of the Italian companies (Croci &
Grassi, 2014), the average degree centrality measured for
the main component was 5.4879, ranging from 1 to 32,
being Pirelli & C. the company with the highest degree
centrality and so the most influent and powerful one.
Closeness centrality measures how close a node is
to all the other nodes in the set of nodes (Wasserman &
Faust, 1994). We can interpret closeness centrality as the
minimum time the flow of information needs to arrive
at another node in the network (Borgatti et al., 2009).
Freeman, Roeder, and Mulholland (1979) posit that
closeness centrality is the distance from a node to all the
others, where the smaller values identify highly central
nodes. Researchers often use a normalized version, dividing
each node centrality into n-1, reversing the values so that
large numbers correspond to greater centrality, ranging
from zero to one. Thus, the normalized closeness centrality
of node i will be represented by Equation 3.
(3)
Revista de Administração Contemporânea, 2022, Early access | doi.org/10.1590/1982-7849rac2022210286.en| e-ISSN 1982-7849 | rac.anpad.org.br
C. P. Salgado, V. S. Adami, J. R. de S. Verschoore Filho, C. M. Costa
where N is the number of nodes and d(i,j) is the function
of the distance between i and j. In a study evaluating the
performance of Chinese foundations, for example, a high
level of closeness centrality of the board interlocking of
these institutions appeared as a factor that affects positively
the outcomes of income and public welfare expenditure
(Wu, Zhang, & Chen, 2021).
Finally, betweenness centrality highlights nodes that
connect different nodes or groups of individuals in the
network (Wasserman & Faust, 1994). It can explain the
power of influence a node has in a network because it joins
other nodes or groups isolated amongst the other nodes in
a network (Zhu, Watts, & Chen, 2010). We calculate the
betweenness centrality of node i using Equation 4.
(4)
where gjik is the number of ways connecting j and k through
i, and gjk is the total number of ways connecting j and k.
Using again the example of the Italian Stock Exchange
companies (Croci & Grassi, 2014), the minimum and
maximum values measured for betweenness centrality were
respectively 0 and 0.1506. Pirelli & C. was the company
with the higher score, thus being in a position to receive
and distribute a high volume of information.
The study of interlocked boards using SNA involves
a particular network analysis mode, called two-mode data
or affiliation data (Borgatti et al., 2018). There are two types
of actors: the directors (the first mode), and the events,
which are the boards of affiliated companies (second mode).
The literature usually defines the companies/boards as the
nodes of the network and the links between the companies
as the interlocks (Scott, 1992).
INVESTIGATING BOARD INTERLOCKS:
A TUTORIAL ON BRAZILIAN LISTED
COMPANIES
We take certain essential steps to measure the
interlocks between directors and companies in the Brazilian
market: first, we perform the data collection procedures
from a specific package on R software, with some searching
parameters. Second, the data are treated using automatic
methods on R. Third, we build the adjacency matrix to
identify companies’ relationships through the sharing of
at least one director. Finally, we map the network and
measure it using R. A summary of the steps is provided in
Figure 1.
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Board of directors’ interlocks: A social network analysis tutorial
Figure 1. Step-by-step process taken to measure interlocks in Brazilian companies.
This paper describes these overall steps for the conducting of board interlock research using the databases of Brazilian companies.
As an empirical example of our method, we used a
publicly listed dataset of Brazilian companies covering 2019
and 2020. Each step required to conduct the procedures is
described over the course of this paper, and these procedures
can be replicated using the code available.
Collecting and treating Brazilian
companies’ data (#Step1 to #Step5)
The first step involves the collection of corporate
data from the Reference Form (FRE). These data are
available on the CVM website. Although these are publicly
available data, it would have been necessary to extract them
individually for each company if we had to use the website.
To collect the corporate data on a range of companies, we
used the GetFREData package (Perlin et al., 2018) from
R statistic software. The additional packages used in this
tutorial are described in our code, and these packages can
be replicated with script “1” (#packages and libraries).
#Step1 of our code allows the researcher to collect data on
Brazilian public companies available on the FRE, by simply
selecting the period requiring analysis. However, connection
problems or high latency can interrupt the download. In
these cases, the program will present a warning such as “Try
rerunning the code as the corrupted zip file was deleted
and will be downloaded again.” The user then needs to run
#Step1 again, and this time the program will check the
companies already downloaded and jump to a download of
the remaining companies. The files relating to companies
that have already been downloaded will not be downloaded
again because the files have been saved in the cache.
Moreover, data collection could take a while because
it downloads and reads each company’s FRE files. We
therefore provided a ready dataset like the one created by
running #Step1 in .rds format (R native database). This
dataset is available to import .rds file in #Step2, choosing the
I_fre.rds file that is available in the attachments to this paper.
This was done to optimize the length of time taken for data
collection. We collected this database while this paper was
being created, meaning some data could be outdated. To
reach the updated database, we suggest running #Step1.
Once the data collection process has finished (on
#Step1 or #Step2), we have a list containing all of the
companies’ available corporate FRE data. As we focus on
Revista de Administração Contemporânea, 2022, Early access | doi.org/10.1590/1982-7849rac2022210286.en| e-ISSN 1982-7849 | rac.anpad.org.br
C. P. Salgado, V. S. Adami, J. R. de S. Verschoore Filho, C. M. Costa
the board of directors’ composition and its connections,
we will select only the data we need in #Step3. To get
only the members of the board of directors, we filter the
type of director, setting the code.type.job variable of the
df_board_composition.
The result of #Step3 is a table with the company
name, CNPJ (Cadastro Nacional de Pessoa Jurídica), the
corporate registration number with the Brazilian tax
authority (Receita Federal do Brasil), company name,
reference date (information date), CVM code, director’s
name, and CPF (individual taxpayer registration) number,
which is a document provided by the Brazilian tax authority
to identify Brazilian citizens and foreign citizens resident
as taxpayers in Brazil. As the companies fill out the form
on FRE manually, there is a strong likelihood of mistakes
existing in the information. Usually, we can find some
errors in FRE, such as CPFs with less than 11 digits or even
CPF information missing entirely. The lack of standardized
information could interfere with our analysis. Therefore, we
provide data treatment procedures to mitigate this risk and
correct the original database’s common mistakes.
First, we standardize the names and CPFs of the
directors using #Step4. After this, we take those cases where
the CPF information is missing or incorrect and search for
each director’s correct CPF in other entered cases. Finally, if
we could not find the CPF, we create a code for this director
instead of the CPF to keep a unique code for each director
in our database. To do this, we run #Step5. These procedures
are essential to be able to correct errors in the dataset and to
guarantee its reliability.
Creating the adjacency matrix using R
Studio (#Step6 and #Step7)
To illustrate some possibilities for the application of
SNA to board interlocks, we used IGraph package (Csardi &
Nepusz, 2006) to generate the graphs in R, which provides
graph characteristics and manipulates a large and complex
network (Meghanathan, 2017). We used the SNA package
(Butts, 2008) to generate and analyze the network measures
and Keyplayer package (An & Liu, 2016) to generate the
fragmentation measure.
The relational matrix allows us to identify the
relationship between two or more companies that share at
6
Board of directors’ interlocks: A social network analysis tutorial C. P. Salgado, V. S. Adami, J. R. de S. Verschoore Filho, C. M. Costa

least one director. Each matrix cell shows whether a node
A is interconnected with a node B (Lazzarini, 2008). For
instance, we create two relational matrices, one for each year
of our sample, 2019 and 2020. First, we create a matrix with
the company and directors, using companies and directors’
previously created codes. This matrix identifies each director
and enters the information ‘1’ when the director sits on the
respective company’s board of directors. We then multiply
this matrix by its transposed matrix to establish a ‘companies
x companies’ square matrix. In this new matrix, we can
identify the number of directors that companies share at that
time. The diagonal matrix will be entered as zero because it
means the relationship between the company and itself. This
process is detailed in #Step6 for each year that we want to
create the relational matrix.
We can also plot the network graphs for each year of
our sample in the same step, using the commands described.
The outcome is shown in Figure 2. This visual comparison
did not show significant change in the general configuration
of our sample’s network. The pattern of relationship among
the companies has remained relatively similar from one
year to the next. Both sociograms represent relatively low
density, high fragmented networks. Part of the companies
are connected forming a great group, other parts constitute
small subgroups of two (diads), three (triads), or more
companies and the rest of the companies are isolated, not
connected to any other company.
Now, we finally have the relational matrix and the
networks ready. We can also export the matrix in CSV format
by using #Step7, which can be used to map and generate
the network measures in software different to R. The matrix
created is shown in Figure 3. We will then present the steps
for measuring and visualizing networks using R.

Figure 2. Network graphs.

Figure 2 shows the outcome of #Step6 of the code, representing the entire network between Brazilian companies each year. It can also be replicated with script “191.”

Figure 3. Example of adjacency matrix for 2019.

Figure 3 shows the outcome of #Step7 of the code, representing the adjacency matrix created with the companies from our sample. This also shows the relationship between
companies by filling the cells with the number of directors they share in this year. Notice that companies 1309 and 1325 share two directors.

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Board of directors’ interlocks: A social network analysis tutorial C. P. Salgado, V. S. Adami, J. R. de S. Verschoore Filho, C. M. Costa

Visualizing and measuring board interlocks
using R Studio (#Step8 to #Step10)
Our empirical example generates measures at the
network’s level: size, density, degree of centralization,
betweenness centralization, closeness centralization,
connectedness, and fragmentation. In #Step8 we create
a data frame with these measures for each year, making
comparisons and analyses. The results are shown in Table
1. In the same step, we create a data frame with only the
centrality measures (degree, betweenness, and closeness) for
each sample company. A sample of these results is shown
in Table 2, showing where we selected specific companies
to illustrate how the data is shown. These results can be
exported for analysis and included in the econometric
models as interest, independent, or moderating variables,
according to the needs of each study.
These network measures could be used as variables in
econometric models. To do this, we join the measures for
all years of the sample. In Table 3, we show the descriptive
statistics of the consolidated sample for each variable. This
procedure is described in #Step9.

Table 1. Network measures (general).

Year Size Density Degree Betweenness Closeness Fragmentation Connectedness Components
2019 419 0.0158 0.0586 0.0987 0.2560 0.9036 0.471 45
2020 466 0.0135 0.0555 0.0762 0.2394 0.8950 0.549 46
Note. This table shows all measurements created with our code in #Step8. It can be replicated with script “217.”

Table 2. 2019 network measurements (for each company).

Company Degree Betweenness Closeness
701 5 0 0.1808
906 24 429.98 0.161
922 3 285 0.1432
1023 8 2799.32 0.2008
1120 1 0 0.1122
1210 4 285 0.1004
1228 1 0 0.1224
1309 4 1 0.0024
1325 2 0 0.0018
1384 11 0 0.1414
Note. This table shows the network centrality measurements created in #Step8: degree centrality, betweenness centrality, and closeness centrality. It can be replicated with script
“217.” Source: The authors.

Table 3. Descriptive statistics.

Variables Means Median Min Max Q1 Q2 Q3 SD
Degree 6.52 4.00 1.00 32.00 2.00 4.00 9.00 6.04
Betweenness 523.58 0.14 0.00 9160.19 0.00 0.14 577.94 1093.64
Closeness 0.11 0.13 0.00 0.23 0.01 0.13 0.16 0.07
Fragmentation 0.89 0.89 0.89 0.90 0.89 0.89 0.90 0.00
Component 7.31 1.00 1.00 46.00 1.00 1.00 7.00 11.94
Note. This table shows the descriptive statistics from our sample (2019 and 2020), based on the variables created in the previous steps. It is possible to generate these statistics
for each year of the sample. These data will be used as variables in the econometric models. Source: The authors.

Taking a closer look at ‘degree’ in Table 3, the The minimum number of directors companies share is one
average of interlocks established between companies is (because we are considering only the interlocked companies)
6.52. Meanwhile, the median is four, which means that and the maximum is 32. Coincidently, this is the same
the interlocked companies usually share four directors. maximum number as in Croci and Grassi (2014). After this,

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Board of directors’ interlocks: A social network analysis tutorial C. P. Salgado, V. S. Adami, J. R. de S. Verschoore Filho, C. M. Costa

we can generate the graphs based on the measures in #Step9.
The first is degree centrality, which shows the nodes that are
more central in the network. Our empirical example shows
the more prominent companies in the Brazilian market
environment in a bigger size, considering the amount of
board interlocking between them.
In this case, the more prominent companies are
those that have the greatest number of connections with
other companies, directly or indirectly (Figure 3). Like in
Figure 2, the visualization of these sociograms permits to
conclude that the general pattern of relationship of the
network has remained from 2019 to 2020, with a significant
number of central companies. However, some changes
could be happening on companies that are more central.
This identification is facilitated using the degree centrality
measure (see Table 4).

Figure 4. Degree centrality.

This figure presents the centrality degree of our network provided by #Step10. It can be replicated with script “324/degree network graph.”

Following, running #Step10, we can also generate companies have a lower degree of centrality in the network by
the histogram of degree centrality. It shows the distribution sharing from zero to five directors (the more peripheral ones).
of degree centrality in the companies of our sample. We can Few companies share more than 20 directors in our sample in
see from our empirical example that in both years, most both years. The histogram is illustrated in Figure 5.

Figure 5. Degree centrality histogram.

This figure shows the distribution of degree centrality in our sample, as provided by #Step10. It can be replicated with script “342/degree histogram.”

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Board of directors’ interlocks: A social network analysis tutorial C. P. Salgado, V. S. Adami, J. R. de S. Verschoore Filho, C. M. Costa

Again, the graphs for 2019 and 2020 are similar, with
few differences in the distribution of the number of directors
shared by the companies. Variations that are more significant
probably could happen comparing longer periods.
Another possible analysis regarding the degree
centrality involves a comparison of the companies with the
highest degree of centrality to identify eventual changes. To
exemplify this, we listed companies with a degree centrality
higher than 24 (Table 4). Companies marked in bold
represent changes in degree centrality to top companies.
We can see that the top seven central companies remain the
same, but important changes happened with the emergence
of company 18139 and loss of prominence of companies
21822, 21857, and 00906. Company 18139 is now in
position to share information and experiences with a large
number of other companies, and then obtain benefits such
as better strategic decisions (Fich & White, 2003; Larcker et
al., 2005) and the acceleration of the development of new
products (Mazzola, Perrone, & Kamuriwo, 2016).

Table 4. Companies with degree centrality above 24.

2019 2020
Degree Company Degree Company
31 21938 32 21938
30 03271 31 03271
30 18996 31 18996
27 02453 27 02453
27 15253 27 20303
27 20303 27 20320
27 20320 26 15253
26 21822 24 03190
26 21857 24 05576
24 00906 24 14605
24 03190 24 18139
24 05576
24 14605
Note. This table shows the differences in degree centrality in different years of our sample. We can see in bold that the companies 21822, 21857, and 00906 that appear with
degree centrality above 24 in 2019 did not appear as having higher degree centrality in 2020. It can be replicated using #Step8 (Network measures tables) with script “262.”
Source: The authors.

Our third graph (Figure 6) presents the betweenness
centrality, showing in a bigger size the companies that
act as a bridge in the network by connecting different
companies. A simple comparison of the sociograms makes
it possible to verify that there was an increase in the number
of companies with high intermediation centrality. That is,
there are more companies in a privileged position, being
able to influence or restrict the interactions between other
companies and obtain benefit from that (Zhu et al., 2010).
As in the case of degree centrality, it is interesting
to compare the companies with the highest values of
betweenness centrality to identify eventual changes. In
Table 6, we listed the first 15 companies with the highest
betweenness centrality each year. Companies marked
in bold represent the changes observed. There were
more changes in betweenness centrality than in degree
centrality. It means that there are more new companies in
this privileged position and that several other companies
lost this privilege due to changes in the composition of
the companies’ boards. This privileged position can imply
that companies with higher betweenness centrality could
control the flow of information in the network. As long
as this structure changes over time, information flow can
also change.
Finally, we created the normalized closeness graph
(Figure 7), showing the lower distances from one node
to all the others. A high level of closeness indicates that
a node is highly central. Our sample shows that many
companies are central in the network since there are many
big-sized nodes. It means, for example, that companies
with high values of closeness centrality potentially receive
information from a random company very quickly and
with less distortion (Borgatti et al., 2018). Once more, the
network configuration from one year to another is similar.

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Board of directors’ interlocks: A social network analysis tutorial C. P. Salgado, V. S. Adami, J. R. de S. Verschoore Filho, C. M. Costa

Figure 6. Betweenness centrality.

This figure shows those companies with higher betweenness centrality as more prominent nodes. These companies act as a bridge in the network, joining different companies by
sharing their directors. It can be replicated using #Step10 with script “350/betweenness network graphs.”

Table 5. Companies with the highest betweenness centrality.

2019 2020
Betweenness Company Betweenness Company
8994 02437 8801 08133
4626 16292 8120 20087
4414 08133 8027 09512
4164 24694 6441 21016
3720 22055 6413 16292
3622 18465 5341 21237
3607 20028 4456 21091
3600 04820 4294 17973
3525 20087 4236 13986
3416 24295 4172 19992
3251 19992 4051 04820
2985 12653 3935 16616
2824 22349 3851 21199
2799 01023 3778 19836
2560 09512 3617 24902
Note. This table shows the differences in betweenness centrality in the different years of our sample. We can see in bold that some companies, such as 02437, appear with
betweenness centrality of 8994 in 2019 but do not appear amongst the higher betweenness centrality in 2020. This can be replicated using #Step8 (Network measures tables)
with script “262.”

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Board of directors’ interlocks: A social network analysis tutorial C. P. Salgado, V. S. Adami, J. R. de S. Verschoore Filho, C. M. Costa

Figure 7. Closeness centrality (normalized).

This figure presents the companies with higher closeness centrality as more prominent nodes. These companies have many direct connections with other companies by sharing
their directors. This can be replicated using #Step10 with script “368/closeness network graphs.”

Only by seeing the graphs presented in Figures 2, 4,
6, and 7, is it possible to understand that the network in
both years has a lower cohesion and a significant level of
fragmentation, with a high number of components, some
of which are with a small number of companies. Data
presented in Table 1 complement this qualitative evaluation,
informing each year’s density, number of components,
and the fragmentation and connectedness indexes. These
measurements, along with the centralization, indicate few
changes in network level analysis when comparing 2019
with 2020. On the other hand, measurements at the level
of the nodes, especially the betweenness centrality, denote
significant changes in the positions of the companies.
Some companies that were privileged in 2019 in terms of
their power of influence have lost those positions to other
companies that have become more central in 2020.
All the steps taken throughout this tutorial, from
data collection, treatment, and possibilities of use are
summarized in Table 6. It is noteworthy that these are only
a few examples of the potential for SNA in the investigation
of the interlocks. Other properties and metrics can be
evaluated, compared, and/or used to analyze the effects of
board diversity, Fiscal Council members’ networks, or other
aspects from emerging economies, as suggested by Smith
and Sarabi (2021b).

Table 6. Steps summarized.

Step Procedure
#Step1 Collecting data from FRE.
#Step2 Shortcut to select data by using .rds file available.
#Step3 Select info of boards and directors to conduct the research.
#Step4 Handling data ID and names.
#Step5 Handling data and few adjustments (check and create CPF codes).
#Step6 Creating the adjacency matrix and network graphs.
#Step7 Exporting the complete matrix to CSV format.
#Step8 Creating tables with network measures.
#Step9 Descriptive statistics.
#Step10 Graphs of network measures.
Note. This table sums up the steps taken in this tutorial.

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Board of directors’ interlocks: A social network analysis tutorial
ADVANTAGES AND LIMITATIONS OF THE
METHOD
The procedure provided in this tutorial regarding
data collection, treatment, and social network analysis offers
several advantages over different and segregated procedures.
First, data collection steps help researchers effectively use
GetFREData (Perlin et al., 2018), selecting the necessary
data and the period covered to conduct the research.
Second, data treatment procedures bypass the reduced
reliability problems created by data informed incorrectly
by companies in the FRE. Third, all the steps required to
conduct social network analysis regarding board interlocks
are provided in this tutorial, making the process easier for all
researchers to conduct and understand the networks formed
between companies that share at least one director. Finally,
the empirical illustration of all procedures has demonstrated
its advantages by providing an integrated and automatic
procedure for conducting the research. Before this, many
steps were done separately and conducted mainly by hand.
Despite their advantages, for research into
Brazilian public companies, these procedures have certain
limitations that provide avenues for further methodological
development. First, we provided only a few adjustments in
name and CPF. Additional analyses could be done manually
to check directors’ names and CPFs, which could increase
the number of observations. Moreover, as companies inform
the data without any filling pattern, it becomes hard to map
all the necessary procedures in order to guarantee complete
reliability. Second, in our social network analysis steps, we
have shown only some social network measures. For future
research, there exists the opportunity to conduct a more
in-depth analysis, draft out the steps and procedures to
map out different networks, and include different network
measurements, such as transitivity (Borgatti, 2009).
CONCLUDING REMARKS
The purpose of this tutorial article is to help researchers
conduct their research regarding social network analysis,
in particular board interlocks. To make this possible, we
have provided a step-by-step procedure to conduct data
collection and data treatment. In addition, we showed the
steps for building the adjacency matrix, generating and
analyzing some network measurements and sociograms
using R Studio.
To illustrate the process, we used a dataset with the
board of directors’ composition of Brazilian public companies
covering the years 2019 and 2020. We also analyzed network
measurements to show how they can be interpreted in this
Revista de Administração Contemporânea, 2022, Early access | doi.org/10.1590/1982-7849rac2022210286.en| e-ISSN 1982-7849 | rac.anpad.org.br
C. P. Salgado, V. S. Adami, J. R. de S. Verschoore Filho, C. M. Costa
field of research. Furthermore, these measurements can be
used within the econometric models as variables in many
studies to identify board interlock precedents or outcomes.
Our tutorial has focused on networks formed between
companies that share their directors.
Our main contribution to the proposition of this
tutorial lies in providing a guideline so that future research can
be performed easily. Our primary goal has been to improve
data reliability and orient researchers in the procedures to be
conducted as well as automate most of the tasks that would
be done by hand, subsequently reducing the time spent
treating and handling the dataset. Doing so, we believe this
tutorial can contribute to the enhancing of social network
studies considering the Brazilian environment, increasing the
understanding of board interlocks in an emergent country.
Santos, Silveira, and Barros (2007) have shown that interlocks
have been frequent in Brazilian publicly companies and
that “larger boards, more dispersed ownership structures,
and larger firm size are factors associated with higher level
of board interlocking” (Santos, Silveira, & Barros, 2007, p.
126). However, quite a few studies have encompassed the
understanding of board interlocks’ inputs and outcomes in
the Brazilian context. Besides that, this tutorial contributes
to the literature by providing a practical methodology to
measure corporate governance indicators that can be related
to the currently relevant ESG agenda. Our tutorial may
help researchers analyze, for example, the impact of board
connections on ESG outcomes, such as board diversity and
CEO compensation.
Some avenues for future research using the procedures
described in this tutorial can be followed. Lamb and Roundy
(2016) suggest some research opportunities encompassing
board interlocks, such as an evaluation of interlocks between
firms from different countries, an understanding of board
interlock formation pattern (as firm age, for example), and
the relationships between interlocks and entrepreneurship.
Likewise, Sarabi and Smith (2021) suggest that although
there was an increase in the study of interlocked directors
and its effects in recent years, the gender of the interlocked
directors is often neglected by researchers. In this sense, there
is an opportunity to deepen the knowledge of interlocks
between women directors and how it impacts firms’ strategy
and decisions.
Additionally, this model is focused primarily on how
to collect and handle Brazilian publicly companies’ dataset
to be able to conduct social network analysis on board
interlocks. Although it can be adapted to be applied in
different fields of studies, we acknowledge that all models
have restrictions and researchers can face necessity of
adaptations to apply these instructions in other contexts.
13
Board of directors’ interlocks: A social network analysis tutorial
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Board of directors’ interlocks: A social network analysis tutorial C. P. Salgado, V. S. Adami, J. R. de S. Verschoore Filho, C. M. Costa

Authorship Authors' Contributions

Claudine Pereira Salgado 1st author: conceptualization (equal), data curation (lead),
Heriot-Watt University, Edinburgh Business School methodology (lead), visualization (lead), writing – original
draft (lead), writing – review & editing (equal).
Heriot-Watt University Gait 11, The Avenue, Currie EH14 4AS,
United Kingdom. 2nd author: conceptualization (equal), data curation (equal),
validation (equal), visualization (equal), writing – original
E-mail: claudine_salgado@hotmail.com draft (equal), writing – review & editing (equal).
https://orcid.org/0000-0001-7612-3857 3rd author: conceptualization (equal), data curation (equal),
Vivian Sebben Adami validation (lead), visualization (equal), writing – original draft
(equal), writing – review & editing (equal).
Universidade do Vale do Rio dos Sinos, Programa de Pós-graduação
4th author: conceptualization (equal), data curation (equal),
em Engenharia de Produção e Sistemas
supervision (lead), validation (equal), visualization (equal),
Rua Dr. Nilo Peçanha, n. 1600, Boa Vista, 91330-002, Porto
writing – original draft (equal), writing – review & editing
Alegre, RS, Brazil.
(equal).
E-mail: vivian.sebben.adami@gmail.com
https://orcid.org/0000-0002-6320-8840 Conflict of Interests
The authors have stated that there is no conflict of interest.
Jorge Renato de Souza Verschoore Filho
Universidade do Vale do Rio dos Sinos, Programa de Pós-graduação Plagiarism Check
em Administração The RAC maintains the practice of submitting all documents
Av. Unisinos, n. 950, Cristo Rei, 93022-750, São Leopoldo, RS, approved for publication to the plagiarism check, using
Brazil. specific tools, e.g.: iThenticate.
E-mail: jorgevf@unisinos.br
Peer Review Method
https://orcid.org/0000-0001-7588-7871 This content was evaluated using the double-blind peer review
Cristiano Machado Costa* process. The disclosure of the reviewers’ information on the
first page, as well as the Peer Review Report, is made only after
Universidade do Vale do Rio dos Sinos, Programa de Pós-graduação concluding the evaluation process, and with the voluntary
em Ciências Contábeis consent of the respective reviewers and authors.
Rua Dr. Nilo Peçanha, n. 1600, Boa Vista, 91330-002, Porto
Alegre, RS, Brazil. Data Availability
E-mail: cristianocosta@unisinos.br The authors claim that all data used in the research have
https://orcid.org/0000-0001-9130-2562 been made publicly available through the Harvard Dataverse
platform and can be accessed at:
* Corresponding Author
Salgado, Claudine Pereira; Adami, Vivian
Sebben; Verschoore Filho, Jorge Renato de
Funding Souza; Costa, Cristiano Machado, 2022,
The authors would like to thank the Heriot-Watt University "Replication Data for: "Board of Directors'
for the financial support for the research in this article Interlocks: A Social Network Analysis Tutorial"
published by RAC - Revista de Administração
(School of Social Sciences Scholarship Award for Claudine Contemporânea", Harvard Dataverse, V1.
Pereira Salgado). Also, this study was financed in part by https://doi.org/10.7910/DVN/QHIMWA
the Coordenação de Aperfeiçoamento de Pessoal de Nível
RAC encourages data sharing but, in compliance with
Superior - Brasil (CAPES) – Finance Code 001 (Master's ethical principles, it does not demand the disclosure of any
Scholarship for Claudine Pereira Salgado and Post-Doc means of identifying research subjects, preserving the privacy
Scholarship for Vivian Sebben Adami). of research subjects. The practice of open data is to enable
the reproducibility of results, and to ensure the unrestricted
Copyrights transparency of the results of the published research, without
RAC owns the copyright to this content. requiring the identity of research subjects.

RAC is a member of, and subscribes to the principles of the Committee on Publication Ethics (COPE) for scholarly publication

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